Many Australians aren’t confident they have enough assets to support their retirement, according to MLC’s Australia today report, with 66% stating they’re only ‘slightly or not at all prepared’.
The good news is that people who have help from financial professionals are far more confident.
Professional help offers silver lining
There’s a silver lining – Australians with the help of financial professionals (financial advisers or accountants) are more than twice as likely to feel ‘very or fairly well prepared’ for retirement than those without a financial professional. They’re also 21% less likely to feel ‘slightly or not at all prepared’.
You’re less likely to rely on government support with professional help
When asked if they will rely on the Australian Government in retirement, 43% of respondents agreed. Of those aged 50-70 years, 49% are relying on the government. Meanwhile almost one third of all Australians may be relying on an inheritance to help pay off their mortgage and ensure their future financial security.
Those surveyed with financial planners or advisers are also 22% less likely to expect to rely on government support to ensure their financial security (52% with financial advisers compared with 27% without) and are 10% less likely to be relying on an inheritance to ensure financial security (77% with financial advisers compared with 67% without).
Higher cost of living is impacting our plans
Lack of confidence in our retirement plans stems from the difficulty we’re having making ends meet today, in particular for those trying to manage their own budgets without the help of financial professionals.
When asked if ‘the cost of living where you live makes it difficult to maintain your standard of living’, 48% of respondents without financial professionals agreed. However only 30% of people with financial advisers agreed (18% less) and only 38% of people with an accountant agreed.
Take a look at your financial influencers
The people you spend most of your time with can significantly impact your attitudes to spending, saving and planning.1 Let’s call your circle of friends your key financial influencers.
Have you found yourself wondering if ‘Julie and Jim can go to Thailand every Spring why don’t we?’ or If “Sarah and Tom can afford that new Jeep, why are we still driving our beat up 4WD?”
Most of us are surrounded by friends and networks who are (within a range) financially like-minded. They may have a similar mortgage, car, they go on similar holidays to similar destinations and similar restaurants.
The question is – is your circle of influencers helping or hindering your financial security? Are you getting casual advice from your friends or family about anything financial, whether to renovate, borrow or invest? Are your friends qualified to give you that advice? Are they passing on professional advice from an adviser or accountant that has been tailored to their specific needs? It’s worth asking.
Instead, maybe it’s time to take a step back and really think about the life you’d like to live now and in retirement. Maybe it’s time you engage the help of a qualified professional to put a plan in place for your finances so you can step confidently into a more secure future.
Is the cost of living too high to afford an adviser?
It’s easy to feel that the cost of living is so high there’s nothing left for a financial adviser, so why not just put the money towards a holiday instead.
You might be surprised at how cost effective financial advice can be, especially when the benefits from a financial plan may accrue over many years. Money spent today, may be multiplied tomorrow.
The first meeting with an adviser is usually free. During this meeting, you and the adviser can discuss your financial goals and the adviser can give you an idea of what they can do to help you reach them.
If you decide to continue with the adviser, they will prepare a statement of advice (SOA) that will formally document the advice, the strategies and any financial products they recommend. The cost for preparing the SOA will be billed to you or may be deducted, with your permission, from the balance of your investment.
The cost of the advice will depend on its scope. As a guide, expect to pay between $200 and $700 for simple advice and between $2000 and $4000 for more comprehensive advice. If you've agreed to ongoing advice, some of the cost may be paid over time.2
The rewards of engaging a financial professional may include: a more effective budget, a more comprehensive and considered investment strategy, an estate planning strategy, and adequate protection for your family in case something happens to you.
So how to you go about finding the right financial professional?3
Here are five steps to help you choose a financial adviser that’s right for you:
1. Make an adviser shortlist
Industry associations such as The Financial Planning Association and the Association of Financial Advisers usually have 'find an adviser' services that will help you find an adviser in your area. Most associations require their members to participate in ongoing training, have a code of conduct for members to follow. You can also find an adviser here.
Once you have a short list of advisers, it's important to check their history, qualifications and current employment status before you approach them about getting advice. Before you choose an adviser, you should check ASIC's financial advisers register to make sure they have a license and the right experience andqualifications to give you the level of service you need.
2. Check their qualifications and ongoing training
A financial adviser can be qualified to give advice after meeting only minimum training requirements. You should look for an adviser who also has a diploma, an advanced diploma or degree qualification in a relevant discipline such as finance, economics, accounting or financial planning. Like other professionals, it's important for an adviser to keep up with industry or regulatory changes that might affect their clients. An adviser should participate in regular training activities such as courses or seminars run by universities, industry associations, professional bodies or registered training organisations.
3. Evaluate their experience and fit
Ask the adviser about their typical clients. This will help you assess whether they have the experience to deal with people with similar issues and goals to you. For example, are the adviser's other clients planning for retirement or are they young families wanting to save for their children's education? Also find out how long they’ve been in business and if they have client testimonials you can read.
4. Check the range of financial products they recommend
When you speak with an adviser, make sure they focus on the services and strategies they can offer you, rather than the products they can sell you. Check if the adviser can provide advice about the financial products you currently have, for example super or insurance.
Be careful of advisers who only sell one investment product or solution as this may mean the advice doesn't meet your specific needs and objectives.
5. Review their fees
Ask the adviser for an estimate of the cost of their advice. Even a rough estimate will give you an idea of what you'll be paying.
How confident are you in your retirement plans?
Read more from Australia today
MLC and IPSOS, Australia today report, Aug 2016.
1 Oxford University Press Journal of Consumer Research: Social Defaults: Observed Choices Become Choice Defaults, 2014
2 ASIC MoneySmart, Financial Advice Costs, Aug 2015
3 ASIC MoneySmart, Choosing a financial adviser, Aug 2015